Freedom Communications, owner of The Orange County Register and The Press-Enterprise in Riverside, will be sold to Digital First Media, the company that owns the Los Angeles Daily News and other Southern California newspapers, the Daily News reported Saturday.
The Daily News quoted Freedom Communication's bankruptcy attorney, who said the decision to accept the Digital First bid came after a federal judge on Friday issued a temporary restraining order that halted the sale of the papers to Tribune Publishing, the owner of the Los Angeles Times.
“It’s been very topsy-turvy, but my guess is that it’s over, because Tribune, I don’t believe, will be able to get the temporary restraining order removed in a timely manner,” attorney William Lobel told the Daily News. “So we have determined, as the sellers, to take the bid of Digital First Media, and we will appear in court Monday to confirm the sale.”
Tribune Publishing had won the auction for Freedom's two newspapers with a $56 million bid. However, U.S. District Judge Andre Birotte Jr. sided with the U.S. Justice Department, which said the deal giving Tribune control of the Times, the Register, the Press-Enterprise, the San Diego Union-Tribune and other newspapers would create a California news monopoly.
In his ruling, Birotte said the government has shown "a likelihood of success on the merits of its claim."
Tribune said in court filings opposing the order earlier Friday that a temporary restraining order would likely kill the $56 million deal and set up the second bidder, Digital First Media, to be the likely new owner.
"The government's request, if granted by this court, effectively removes Tribune altogether from the proceedings in the Bankruptcy Court," Tribune said, according to the papers filed in U.S. District Court in Los Angeles. "A temporary restraint on Tribune will ensure that it will not acquire the properties."
A hearing in bankruptcy court is scheduled for Monday.
Tribune Publishing already operates the L.A. Times and the San Diego Union-Tribune, which it purchased last year.
If the sale to Tribune had gone forward, it would have given the company control of the four largest daily newspapers in Southern California, with as many as 1,000 journalists covering an area that stretches from Los Angeles to the Mexican border—a region of 18 million people.
In its Friday objections, Tribune criticized the Justice Department's "eleventh hour" interest in the deal, given that the media conglomerate was open about its interest as bankruptcy proceedings unfolded.
The company also complained that the government was relying on "severely outdated" notions of the media market and had cited 50- and 60-year-old legal cases from an era before digital publication in its bid to block the sale.
The Justice Department fired back in court papers late Friday, saying that 200,000 residents of Orange and Riverside counties buy daily newspapers despite the advent of digital publications and the additional cash the higher bid would provide for creditors did not justify the loss of media competition.
The bankruptcy must close by March 31, when temporary private financing keeping the two newspapers afloat will dry up.
Digital First, which owns nine Southern California papers and websites, including the Daily News, made a $45.5 million "stalking horse bid" for the newspapers.
An investor group led by Freedom Communications' managers pulled out of the bidding.
Freedom Communications filed for bankruptcy protection in November. It followed a series of layoffs and buyouts after an aggressive expansion of print journalism that included starting daily papers in Los Angeles and Long Beach and buying the Press-Enterprise for $27 million.
In addition to the L.A. Daily News, Digital First Media owns the Inland Valley
Daily Bulletin in Ontario, the Long Beach Press-Telegram, the Torrance Daily Breeze, the Pasadena Star-News, the Redlands Daily Facts, the San Gabriel Valley Tribune, The Sun in San Bernardino, the Whittier Daily News, and the website LA.com.